A few Medicinal Cannabis Stocks to look at - CAN, CPH and MDC

Legalisation of Cannabis in Australia

Cannabis is widely used for the remedies of Palliative care, Chronic non-cancer pain, Nausea and vomiting, Multiple sclerosis and many more chronic diseases. Before 2016, the production of cannabis was restricted in Australian region. Previously, Australia used to import all the cannabis and related products. However, in 2016, the Australian government legally authorised the doctors to prescribe medicinal cannabis to the patients for the treatment of various diseases. The government has given licence to a handful of pharmaceutical companies, to manufacture medicine from extracted cannabis.

At present, a handful of companies have started growing cannabis and have installed manufacturing facilities. In some cases, they have tied up with experienced players from Europe, Canada, US and so forth. After receiving an approval for the cannabis products, most of the companies were indulged in the R&D development, followed by several trials being carried out on them.

Let us now look at a few ASX listed cannabis related stocks.

Cann Group Limited

Cann Group Limited (ASX: CAN) is engaged in the plantation, breeding, extraction, R&D and production of cannabis which are used for the treatment of several medical diseases across Australia. CAN received medical licence in February 2017 and started cultivation of cannabis from March 2017. CAN was the first company to receive a cannabis licence in Australia. The company bridges the gap between prescribers, pharmacists and sponsor manufacturers, and provides an integral platform for cannabis products under one roof. It also provides logistic and distribution support, wholesale ordering and pharmacy dispensing. The company is headquartered in Melbourne. It has two cultivation and R&D facilities in Victoria. Aurora Cannabis Inc, one of the largest cannabis companies in Canada owns 22.9% stake in CANN Group.

Secured Manufacturing Licenses: As per the market update on 26^th July 2019, the Federal Department of Health’s Office of Drug Control or ODC had provided the company with manufacturing licences for its existing Northern and Southern facilities in Melbourne. The above licence would ensure CAN’s presence across all the related segments of cannabis starting from manufacturing, packaging, warehousing, logistics to disposal of medicinal cannabis in final and intermediate dosage.

As per CAN’s Chief Executive Officer, Peter Crock, receiving the manufacturing licences has been a significant breakthrough for them, since it would help the company’s wholly integrated business.

Delivery of commercially grown Cannabis resin: On 14^th May 2019, CAN had announced its first successful delivery of cannabis to Victorian Department of Health and Human Services (DHHS). In October 2018, the company had inked a supply contract with DHHS via its Office of Medicinal Cannabis, for the purpose of delivering cannabis plant extract or resin. As per the CAN’s contract with DHHS, it would buy commercially grown cannabis resin produced by Cann group.

Cannabis resin is extracted from dry cannabis flower which is being produced by CAN at Southern Facility in Melbourne. After that, the product is further processed and undergoes several stages before it reaches to the end consumers or patients. Further, the work on CAN’s new large-scale state of the art cultivation facility near Mildura, after commissioning next year-2020, would be able to generate up to 50k of dry flowers/year.

Source: Company’s Report

The company’s CEO, Mr Crock stated that CAN was happy to collaborate with Victorian Government’s compassionate access scheme, since it has a goal to enhance the life quality of epilepsy sufferers and their respective care givers.

June 2019 Quarter Activities: On 30 July 2019, the company declared June 2019 quarter report for the period ending 30 June 2019. Through the sales in the June 2019 quarter, it had secured a revenue of $2.3 million (up by 413% on yoy basis).

On the outlook front, the management stated that in the current quarter, the development and building of the Mildura facility would be the focal point of the company. Further, it has indicated that the arrangements for the debt funding, needed for the facility would likely to be confirmed in coming months and would be utilised for production purposes. The company would continue to emphasise on the refinement of the commercial strategy to market, its products along with several clinical trials for further development with regards to cannabis medicines.

On 7 August 2019, by the closure of the trading session, CAN’s stock was at A$1.95 up by 0.515 percent from its previous closing price, with a market capitalisation of A$106.61 million.

Creso pharma limited

Creso pharma Limited (ASX: CPH) is a pharmaceutical company, which specialises in cannabis which is used for both human beings and animals. The company has experienced research team who are indulged in R&D, innovate and market cannabis and hemp derived products. CPH is Australia based company and has its production facilities in Switzerland. CPH is the first company to import medicinal cannabis to Australia. It has successfully launched anibidiol ®, (a hemp CBD based medicine) used for animal health along with collaboration with Virbac Switzerland (Global Animal Health company). It has also partnered with Doetsch Grether AG Switzerland (Swiss OTC Pharma) and has launched first CBD nutraceutical used for human health.

Comprehensive Distribution Agreement Signed: On 6^th August 2019, the company has notified on the inking of a comprehensive Distribution Agreement with JC Logistics Ltd t/a Medleaf Therapeutics for the exclusive distribution of CPH’s cannaQIX 50 ® and ten percent CBD oil in New Zealand region.

cannaQIX 50 ®, Source: Company’s Report

As per the management, the above collaboration would aid in higher access to affordable, high quality, broad spectrum, GMP products for people residing in New Zealand. The agreement is effective till December 2022 and Creso has right to cancel the Agreement giving 6 months prior notice, if the targets are not met.

CPH received initial orders from Burleigh Heads Cannabis Limited: On 1^st of August, CPH notified that it got its first orders for its innovative therapeutic product- cannaQIX 50® from Burleigh Heads Cannabis. The orders came after the of late signing of an Exclusive Distribution agreement with Burleigh Heads Cannabis and gaining of an import permit for Australian region (as announced on 30 April 2019). The collaboration stated that cannaQIX 50® (cannabis product) would be sold in Australia through approved channels- ‘LozaCann’. A flagship product of Creso, cannaQIX 50® has been created to help the management of chronic pain.

CPH to be acquired by PharmaCielo Ltd: On 7 June 2019, CPH has announced that it has signed a scheme implementation agreement with PharmaCielo Limited (TSXV:PCLO), a Canadian entity, through which CPH would be acquired by PCLO. PharmaCielo, is the a fully licensed producer of medicinal cannabis oil products in Colombia with the present market capitalisation of ~CAD675 million and is listed on Canada’s TSX Venture Exchange.

The above collaboration suggests a strong strategic move for the companies within the same segment. The above implementation would aid every shareholder of CPH to receive 0.0775 PharmaCielo shares. Whereas, CPH listed optionholders would receive 0.0185 PharmaCielo shares for each CPH share.

On 7 August 2019, by the end of the trading session, the stock price of CPH was at A$0.43 up by 4.878 percent from its previous close. The company has a market capitalisation of A$62.13 million.

Medlab Clinical Limited

Medlab Clinical Limited (ASX: MDC) is a medical life science company based out of Australia having its specialisation across manufacturing therapeutic pathways for diagnosed chronic diseases like pain management, depression, obesity etc. Apart from Australia, it has its operational market in US, where the company sells its nutritional products. MDC is developing cannabis-based medications for pain management.

HOA executed to develop Nutraceutical Business in USA: On 5^th August 2019, MDC inked an agreement with US based company ANC or American Nutritional Corp Inc to market its unique nutraceuticals in the US. Some of the company’s key products comprise of NRGBiotic^TM (which is at present, utilised in ongoing depression trials at QUT) and MultiBiotic^TM. Management has confirmed that the first US launch of these products will likely to happen during the end of this calendar year. Medlab CEO, Dr Sean Hall stated that MDC was pleased to collaborate with American Nutritional Corp Inc, which would create an opportunity for MDC to tap the US nutraceutical market.

MDC obtains Human Ethics Approval: On 18^th June 2019, MDC received Human Ethics approval for a second NanaBis^TM trial. The trial would follow how the utilisation of NanaBis^TM is done by the tAustralian doctors and the feedback from the patients. The patients would be then able to buy the medicine at a subsidised rate. The management has indicated that this trial is very crucial, as the it would be leveraged through Australian Special Access Scheme (SAS) which would likely to provide important consequences, regarding the after effect of the medicine.

June 2019 Quarter Report: The company notified on the June Quarter on 30 July 2019, wherein it mentioned that MDC has generated income of more than $3 million excluding R&D incentive and discounts. The company has reported a growth of 140% on yoy basis. Record collections stood at $2.589 million, up by 170% on qoq basis. The cash balance of the company stood at $11.442 million as on 30^th June 2019.

On 7 August 2019, by the end of the trading session, the stock price of MDC was at A$0.46 down by 7.071 percent from its prior close, with a market capitalisation of A$106.61 million.

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